Foreign Relations of the United States, 1952–1954, Africa and South Asia, Volume XI, Part 2

446E.9331/10–2552: Telegram

The Ambassador in Ceylon (Satterthwaite) to the Department of State¹

Colombo, October 21, 1952.

187. Re Embtel 179, Oct 20.² Times Ceylon Oct 21 carried full text fol documents:

1. Purchase contract for 80,000 tons Chinese rice signed by Ceylon mission in Peking on Oct 4, price Rs. 720 per ton f.o.b.³ Proceeds from sale to be deposited in Bank Ceylon for account Bank China, Peking. GOC shall ensure seller free use funds to purchase and export rubber and/or other Ceylon products.

2. Preliminary report to cabinet of mission chief Senanayake presented on Oct 17. This outlined all proposals and emphasized benefits to Ceylon. “Rice described as excellent quality much superior to Burma”. In conclusion Senanayake stated “We note on Chinese side absence of spirit of bargaining and haggling on comparatively small points”.

3. Trade agreement between Ceylon and China approved by Ceylon cabinet on Oct 17. This loose agreement (for one year but may be extended as agreed) with no contractual obligations and merely expresses desire to promote trade between two countries. Lists of commodities available for export by each country were annexed among such items exportable from China to Ceylon is sulphur with target figure of 2,000 metric tons. Article I states trade between two countries expected reach annual volume approximately Rs. 250 million on each side. Article V provides all payments for trade between two countries shall be conducted in Ceylon rupees.

4. Separate memos on long-term proposals re rubber and rice presently under consideration by Ceylon cabinet. Govt China agrees purchase 50,000 tons sheet rubber each year for 5 years beginning 1953 and GOC agrees permit exportation this quantity. Govt China agrees pay price in excess average Singapore f.o.b. price. Two govts will fix price for one year at a time. If during this period world market price (Singapore f.o.b. price) exceeds price already fixed Govt China agrees to negotiate new price providing GOC makes request this effect. Price for year commencing from date rubber agreement is concluded shall be 32D⁴ per pound f.o.b. Colombo. Pending decision of two govts on this proposal GOC “is to undertake that there will be no interference with export of rubber to China”. Rice agreement is for five year period beginning 1953. GOC agrees purchase and Govt China to sell each year 200,000 metric tons rice. Two govts will fix price for one year at a time. During this period if GOC makes request for renegotiation of rubber price for same period GOC agrees to negotiate new price for rice if requested by China. Price for rice commencing on conclusion of agreement shall be 56 pounds sterling per metric ton f.o.b.

Emb airpouching copies all documents.

Satterthwaite

1. This telegram was repeated for information to London as telegram 35.
2. See footnote 2, supra.
3. The price, converted to American currency, was $1.51 per ton or roughly 7.6 U.S. cents per pound. The average price Ceylon paid for rice increased dramatically from 5.6 cents per pound in 1951 to 7.7 cents in 1952, insurance and freight included. Ceylon Department of Commerce, Thirty Years Trade Statistics of Ceylon (1925–1954), Part V, p. 1782.
4. The price was 37 cents per pound in U.S. currency. The world or Singapore price of rubber had declined precipitously in 1952, falling from 46 U.S. cents per pound in January to 25 cents in October when the agreement was signed. The Chinese offering price was therefore considered particularly attractive to Ceylonese rubber producers. (The Secretariat of the International Rubber Study Group, London, Rubber Statistical Bulletin, vol. VII, No. 9, June, 1953, p. 37)